Articles and Publications
A Procedural Dilemma
The article below was published in the November, 2015 Cleveland Metropilitan Bar Journal and is republished here by permission:
A PROCEDURAL DILEMMA:
A Barrier to Appealing a Support Arrearage Award
By Douglas P. Whipple
One would expect that an unsuccessful defendant in a civil action, as a matter of course, is entitled to pursue an appeal to the Court of Appeals. But due to an obscure incongruity in the law there is a class of litigants who may encounter an insurmountable obstacle to obtaining appellate review.
A defendant in domestic relations court who is ordered to pay an arrearage of spousal or child support and who has a good faith argument for appeal theoretically would benefit from the provisions of Civil Rule 62(B) to obtain a stay of execution while the appeal is pending. Civil Rule 62(B) permits an appellant to obtain a stay of execution of a judgment as long as an adequate supersedeas bond is posted.
But Civil Rule 75(H) expressly states that Civil Rule 62(B) does not apply to spousal or child support orders. Civil Rule 75(H) provides that if an appellant files a motion to modify a decree for spousal or child support, pending appeal, “[t]he trial court may grant relief upon terms as to bond or otherwise as it considers proper ***.” [Emphasis added.] That is, the trial court has discretion as to whether or not to “modify” a support order pending appeal. The Rule precludes the entitlement to a stay of execution that is available to appellants in the types of cases to which Civil Rule 62(B) applies.
The Eighth District Court of Appeals, construing Civil Rule 75(H) when it was designated as Rule 75(G) (before an amendment in 1998), acknowledged that the Rule “eliminates an appellant’s absolute right to a stay for orders involving custody, support or alimony, even if the appellant proffers security.” Davis v. Davis, 55 Ohio App.3d 196, 201, 563 N.E.2d 320, 326 (8th Dist. 1988) (emphasis added). For such orders the court has broad discretion to deny a stay.
This discretion creates a procedural dilemma. If a defendant’s motion for a stay of execution of judgment is denied he must pay the support arrearage as ordered. If he fails to do so, he is at risk of being held in contempt of court or being subjected to proceedings in aid of execution. If, on the other hand, he pays the support arrearage as ordered, the plaintiff can then move for the defendant’s appeal to be dismissed as moot. The defendant is thus “between a rock and a hard place.”
In Blodgett v. Blodgett, 49 Ohio St.3d 243, 551 N.E.2d 1249 (1990), the husband moved to dismiss the wife’s appeal the day after she complied with the divorce decree. The trial court had ordered that the wife would be paid $2.8 million from escrow if she signed a satisfaction of judgment within forty-five days of the judgment entry. The wife argued that she signed the satisfaction involuntarily and, therefore, her appeal should continue. The Ohio Supreme Court ordered the appeal to be dismissed, concluding that if the party satisfies a judgment merely because she cannot afford to wait for the outcome of an appeal, the party’s conduct is not involuntary.
The question arises as to whether a defendant’s conduct is voluntary or not when he pays a support arrearage because his motion for stay pending appeal has been rejected. In the matter of Janosek v. Janosek, 2007-Ohio-68 (8th Dist.), the husband appealed an order awarding attorney fees of $320,000 to the wife. The Court of Appeals examined whether the husband’s appeal was moot because he had paid the attorney fees, and considered the impact of the precedent of Blodgett. Id., ¶ 134. In recognition of the fact that the husband had attempted, without success, to obtain a stay of the attorney fee award pending appeal, the Court determined that he “had little choice but to pay the award pending appeal or risk being held in contempt and incarcerated by the trial court.” Id., ¶ 135. Having thus distinguished Blodgett, the Court of Appeals proceeded to consider the merits of the husband’s appeal and, in fact, vacated the award. Although the husband’s motion for stay had been denied, his ability to pursue the appeal was not thwarted.
In Buckles v. Buckles, 46 Ohio App.3d 118, 546 N.E.2d 965 (10th Dist. 1988), the Court of Appeals affirmed the granting of a stay of a substantial lump sum alimony award (secured by a supersedeas bond) while the case was pending on appeal. The Court observed that the provision of then-Civil Rule 75(G) meant that the automatic-stay provision of Civil Rule 62(B) does not apply, and that a party must apply to the court not only for a determination as to the amount of a bond but also whether or not a stay should be granted at all. Id., 46 Ohio App.3d at 120, 546 N.E.2d at 969. The purpose of Civil Rule 75(G), the Court stated: “is not to prevent a stay of execution but, instead, is to provide a different procedural device, during the pendency of the appeal which may be utilized in lieu of a stay, namely, modification.” Id., 46 Ohio App.3d at 122, 546 N.E.2d at 969.
The Buckles Court affirmed the granting of a stay in order to protect the interests of both parties, stating:
Maintaining the status quo during the pendency of the appeal is an appropriate consideration where the other party is adequately protected.
Id., 46 Ohio App.3d at 123, 546 N.E.2d at 969-70, n.4. The Court warned that if the husband had paid the alimony as ordered, the wife could utilize that circumstance as an offensive tactic, stating:
In fact, it is arguable that had the defendant voluntarily paid and plaintiff voluntarily accepted the lump-sum alimony payment, any question concerning that issue would have been moot and not subject to consideration upon appeal.
Id., 46 Ohio App.3d at 122-23, 546 N.E.2d at 969, n.4 (emphasis added). The Buckles case, although affirming the granting of a stay of execution, illustrated the very existence of the dilemma, to wit, that the denial of a stay in these circumstances is discretionary and that a defendant simply might not be able to obtain a stay.
The Ohio Supreme Court has addressed a case in which the procedural dilemma was prominent; but the light that the Court shed on the issue is hardly more than the flicker of a matchstick. The case arose from post-decree motions filed by both of the ex-spouses. The husband challenged the wife’s demand for spousal support on the grounds that she allegedly had misappropriated large sums of money from his business. The domestic relations magistrate pondered the cross-motions for sixteen months. Due to this delay, the magistrate’s eventual ruling in favor of the wife instantly created a substantial arrearage. The husband appealed not only the arrearage determination but the decision that the wife was entitled to any support whatsoever. Chiro v. Foley, 2013-Ohio-4808 (8th Dist.).
A Procedural Dilemma, continued
The husband’s attempts to obtain a stay of execution were rejected by the trial court and again by the court of appeals. The wife promptly filed a motion to show cause against the husband for failure to pay the arrearage.
When the husband appealed to the Ohio Supreme Court he filed a concurrent motion for stay, which was denied. Ohio Supreme Court Case No. 2013-1768. Having exhausted his appellate remedies, the husband had no choice but to pay the arrearage. As soon as he did the wife moved to dismiss the Supreme Court appeal, relying on Blodgett for legal authority.
The Supreme Court declined to accept jurisdiction of the appeal, but in the same entry denied the wife’s motion to dismiss the appeal. It is intriguing that the Court did not deny the motion “as moot” but, rather, “upon consideration.” Might one infer that the Supreme Court, by not specifying mootness, is thereby favoring the notion that an appellant is still entitled to pursue an appeal even if his motion for stay is denied and he dutifully pays the arrearage. Or does such a conclusion read too much into the Supreme Court’s cursory ruling?
Regardless, the ruling was too little too late. The Trial and Appellate Courts had exercised their discretion, pursuant to Civil Rule 75(H), to deny a stay of execution pending appeal. The husband, knowing that payment of the support arrearage would render his appeal moot, had elected to pursue the appellate review to which he should have been entitled. Having the temerity to not obliterate his own appeal, the husband was adjudged in contempt of court.
The current situation, which gives the courts discretion to summarily deny a stay of execution of judgment, thereby forcing the defendant to obey a arrearage determination at the risk of forfeiting his right to appeal, is injudicious. A support arrearage order that constitutes legal error or an abuse of discretion should be corrected.
No appeal of a support arrearage order should be dismissed as moot where the arrearage is paid after a motion for stay has been denied. No litigant should risk being held in contempt for refusing to render his appeal moot by complying with a support arrearage order. The logic of the Janosek decision should, as a matter of law, protect the right to appeal where a stay of execution has been refused on the authority of Civil Rule 75(H).
A rectification of the procedural dilemma should be feasible by statute, procedural rule or judicial interpretation. In any event, the process of appellate review of civil judgments, including support arrearage orders, is too important to permit this procedural flaw to persist.
Dual Agency: A Hazardous Real Estate Practice
The article below was published in the November, 2014 Cleveland Metropolitan Bar Journal and is republished here by permission:
DUAL AGENCY: A HAZARDOUS REAL ESTATE PRACTICE
By Douglas P. Whipple
“Dual Agency” is a practice used routinely in many residential real estate transactions, and the liability risks often are not recognized by the parties or the real estate licensees (both agents and brokers). Many licensees are ill-equipped to know how to identify a conflict between the interests of the buyer and the seller after the Dual Agency Agreement has been signed and, when such a conflict happens, how to proceed.
The potential hazard of dual agency relationships has been recognized in the industry for years but those warnings have not necessarily been heeded. According to a survey of legal issues conducted by the National Association of Realtors® (NAR) in 2011, 57% of respondents stated that the issue of dual agency is the basis for a “moderate” or “high” number of disputes, and more than 83% placed the issue among their top three current legal issues. The survey disclosed a belief that agents and brokers do not understand dual agency. When the NAR survey was conducted again in 2013, breach of fiduciary duty lawsuits accounted for the largest single number of residential real estate-related court cases, including conflicts over the duties owed in a dual agency relationship.
An excellent example of this legal minefield is the recent case of Martha v. Black v. Stouffer Realty, Inc. & Relic, Summit Cty. Common Pleas Case 2010-11-7671. Conflicts arose between the interests of the seller of a home in Richfield and the buyer after they had signed a Dual Agency Agreement. These conflicts served to posture the Agent on the side of Seller and adverse to Buyer.
Eventually the transaction fell through. Seller, disgruntled, sued Buyer for breach of contract. Buyer in turn sued Agent and Broker for fraud, breach of fiduciary duty and breach of the Dual Agency Agreement. The jury returned verdicts against Agent and Broker on all three counts and the court entered judgment on the three verdicts. This judgment was affirmed on appeal. Black v. Stouffer Realty, Inc. & Relic, 9th Dist. C.A. 26550 (Dec. 26, 2013).
The Ohio Department of Commerce Division of Real Estate provides a standardized form that defines “dual agency” and provides a list of actions that the licensee shall and shall not take, outlined by R.C. 4735.57(B). A dual agent may not, among other things, advocate or negotiate on behalf of either party or engage in conduct that is biased on behalf of either party.
By signing the Real Estate Purchase Agreement Seller and Buyer had expressed their common objective to conclude the transaction. Agent thus perceived her fiduciary duty to the parties as doing whatever was necessary to consummate the transaction. But a dual agent’s obligation is more complex than this. Agent’s misperception resulted in considerable conflict, trouble and expense for all concerned—particularly for Agent and her Broker.
The transaction was peppered with mistakes by Agent from the beginning. Buyer testified that only after she had submitted her initial offer on the Purchase Agreement form did Agent present Buyer with the Dual Agency Agreement form, stating authoritatively “Oh, I have this form you have to sign. This is so I represent both the buyer and seller fairly.” Buyer was under the impression that signing the document was a requirement—not a choice.
By this point in time Agent should have presented Buyer with the “Consumer Guide to Agency Relationships.” OAC 1301:5-6-05; R.C. 4735.56(D). At trial Agent admitted that failing to give the Consumer Guide to Buyer until weeks later was wrongful.
Buyer’s initial offer was $500,000, with the deal being contingent on her ability to sell her present home in Greene. Seller formulated a written counteroffer of $515,000, and delivered this counteroffer to Agent. However, Agent never presented the $515,000 counteroffer to Buyer. Agent instead presented a different counteroffer to Buyer four days later, after Agent and Seller secretly conferred with each other. The revised counteroffer provided for a purchase price of $510,000, with Agent waiving $5,000 of her commission. It also provided that the contingency clause would be removed. When Buyer accepted the revised counteroffer she did not know that the original counteroffer had ever existed. Agent concealed the initial counteroffer from Buyer and suggested the revised counteroffer so as to accommodate Seller’s afterthoughts about the contingency clause.
An agent in a dual agency relationship may not engage in any act of advising on or advocating the price of the property—no matter how well intentioned. Here, Agent appreciated how important it was to Seller to remove the contingency clause but ignored how important the clause was to Buyer. Agent was duty-bound to convey to Buyer, as Buyer’s agent, Seller’s original counteroffer. Had Agent done so, Buyer could have accepted the purchase price of $515,000 and retained the ability to terminate the transaction if she was unable—in a soft housing market—to sell her present home. Agent presumably understood that the contingency clause was desirable to Buyer and undesirable to Seller. Agent believed that her willingness to waive some of her commission to facilitate the transaction was commendable; when in fact any effort by a dual agent to influence an agreement on the price terms is prohibited.
Another problem was the physical appearance of the Purchase Agreement. Agents often direct the parties to hand-write their offers and counteroffers in the margins and spaces of the original purchase agreement form. The final version of the Purchase Agreement in this case was virtually indecipherable due to the numerous revisions that had been scribbled throughout the document. The quagmire of notations created ambiguity as to whether Buyer was to make a down payment of $148,000 or only $103,000.
Once the parties agreed to the terms of the deal in principle Agent could have prepared and had the parties sign a clean, readable copy of the Purchase Agreement. This is what most lawyers would do if finalizing a contract containing countless revisions. Had Agent done so the ambiguity would have come to light and the parties could have resolved it early on. The ambiguity as to the down payment, which Agent could have prevented, was a major reason why Seller sued Buyer for breach of contract.
Dual Agency, continued
Agent also crossed the line by trying to facilitate financing. Because the purchase of the property was no longer contingent on the sale of Buyer’s home, Buyer sought to obtain a mortgage loan. The bank’s appraisal of the property came back at $25,000 less than the $510,000 price in the Purchase Agreement. Agent informed the loan officer that she disputed the initial appraisal. Agent requested that the initial appraisal be appealed and supplied the loan officer with several additional comps for consideration. But Agent failed to obtain Buyer’s permission to pursue this appeal.
As a result of Agent’s appeal, a revised appraisal established a value of the property that was even lower than the first appraisal—$58,000 less than the purchase price. The loan officer informed Agent that the revised appraisal was controlling. Agent protested and suggested that yet a third appraisal be obtained—again without Buyer’s authorization.
At this point it was in Buyer’s best interest to abandon the anticipated deal. Buyer had no motivation to pay $510,000 for property that appraised for $58,000 less. A loyal advocate would have helped Buyer find a permissible way to terminate the contract rather than continue to pursue the transaction aggressively. The positions of the parties were irreconcilable; Seller wanted to keep the deal and Buyer wanted to kill the deal. Agent could no longer serve the interests of both sides.
The bank eventually denied Buyer’s loan application based on the low appraisals. Still oblivious to the concept of neutrality, Agent promptly put Seller’s property back on the market and served as dual agent for Seller and the eventual purchaser of the property. When all was said and done, Seller ended up with the Agent and Buyer ending up with a Summons.
There were many times that Agent should have informed Seller and Buyer of a conflict and that she was unable to proceed in a manner that was unbiased as to both parties. This case is an important teaching tool for brokers and agents as to their obligations to both sides after the Dual Agency Agreement has been signed. It demonstrates the sobering fact that the principles of dual agency sometimes require the licensees to notify the seller and buyer of their right to terminate or revoke the agency relationship. See, e.g., R.C. 4735.57(B)(7), R.C. 4735.71(A) and R.C. 4735.72(E)(1).
Dual agency is not an effortless maneuver to score a double commission; it fundamentally changes the agent’s relationship with both seller and buyer. For prospective sellers and buyers, this case illustrates why they should not casually consent to a Dual Agency Agreement that an agent has asked them to sign. The case demonstrates that brokers have a responsibility to ensure that their agents understand the Dual Agency Agreement well enough to explain it to sellers and buyers and to implement it conscientiously.
Lawyers ordinarily refuse to enter into dual representation relationships with potentially adverse parties; and once in such a relationship they proceed with considerable caution. In matters involving dual agency, the real estate sales industry would do well to emulate the laudable principle of restraint that is exercised by the legal community. Real estate licensees, for the benefit of their clients as well as themselves, should no longer view the Dual Agency Agreement as a routine practice but, rather, a contract laden with serious risks that may outweigh its potential value.